Nvidia (NVDA, Financial) is stepping up its efforts to trace how its chips using advanced AI are allegedly being exported to China in disregard of US export controls. The tech giant has enlisted partners such as Super Micro Computer Inc. (SMCI, Financial). A region flagged as a potential smuggling hub, the office ordered SMCI to conduct inspections of customers in Southeast Asia.
Nvidia has asked key server manufacturer and distributor Supermicro to confirm that customers hold such servers containing Nvidia’s chips. It came after the US Department of Commerce requested that Nvidia investigate the illegal flow of its products into China.
Sources close to the matter said some Supermicro customers employed sophisticated tactics to disguise hostile resale activities. One method is to duplicate serial numbers on servers with Nvidia chips and stick them on other servers to make tracking more difficult.
Dell Technologies (DELL, Financial) Another prominent Nvidia partner, DELL, has also been asked to audit its Southeast Asian clients as scrutiny of chip shipments expands.
Those inspections are continuing, and The Information has cited claims from people in the smuggling operations who say they eluded Supermicro’s audits.
The situation highlights US companies’ hurdles in enforcing compliance with export regulations while Nvidia’s powerful AI chips repeatedly call for scrutiny. The semiconductor industry and U.S.-China trade dynamics could take a bigger hit as Washington steps up scrutiny of technology exports.
This article first appeared on GuruFocus.
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